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July 26, 2010

The Dialysis Payment Bundle - initial reaction

By Bill Peckham

The Centers for Medicare & Medicaid Services (CMS) issued the final rule creating a new bundled prospective payment system (PPS) for routine outpatient dialysis services. Skimming through the
900+ page PDF and the CMS Fact Sheet, I believe the new rule is an improvement on the initial proposal.

It is gratifying that there is a Home Dialysis training add on which CMS included in response to comments, particularly comments from dialyzors.

Oral-only drugs (binders) are not included initially but CMS will include them after 2014, following additional study.

Covered lab tests will be those on a list, rather than all blood tests ordered by the MCP physician.

There are a lot fewer case mix adjusters - CMS at this time will not use a patient's sex or race/ethnicity to adjust payment.

Those are important changes that improved the final rule.

Trying to understand what happened to the actual payment amount is a little trickier. On page 256 of the final rule, CMS writes:

To summarize, the final base rate per treatment with an outlier adjustment & budget-neutrality is calculated to be $229.63. This amount includes a 5.93% reduction from $251.60 to account for standardization to the projected CY 2011 current system payment per treatment, a 1% reduction to account for outlier payments, and a 2% reduction for the required 98% budget neutrality.

The predicted 2011 mean bundled payment was $261.58. This number was then reduced 21.73% to adjust for "anticipated positive effects" of the impact of the case mix adjusters, or ways in which the new payment system might pay more than the current system. It was then reduced by 1% as a cost offset to pay for anticipated outlier payments, and by another 2% to meet the congressional requirement for a 2% reduction in ESRD spend in 2011, to equal $198.64.

Under the initial proposal the mean bundled payment was reduced by 21.73% to accommodate all the case mix adjusters, under the final rule with far fewer adjusters the mean bundled payment is reduced by 5.93% to get to the base payment. While it appears that there is a $30 increase in the base payment, it really is just an effect of having fewer case mix adjusters. However, it does appear that the payment amount was increased a few dollars in the final rule.

The final rule uses $251.60 as a starting point. In September CMS used $261.58 but that $261.58 included the $12.48 CMS computed was necessary to pay for oral drugs. Given oral drugs are not in the final PPS I would expect CMS to use $249.10 as a starting point ($261.58 - $12.48). Therefor, I believe 251.60 represents a $2.50 increase per treatment over the September proposal.

I think my math is right but I might have missed a 1% adjuster somewhere that would have gotten the numbers to match. I'll follow up once I've had more time to read through the complete rule.

I appreciate the amount of work CMS must have put in to review all the comments and fashion the final rule. I feel the effort I put towards understanding the proposal and commenting was worthwhile and led to a better PPS. I thank CMS for all their hard work and in particular their commitment to us on the sharp end of the needle.

Comments

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Bundling worries me a little bit, in that dialysis appointments are the most frequent medical treatment opportunity for kidney patients. Flat rates might discourage additional needed treatment that might otherwise happen at these appointments. I also wonder how bundling may affect innovation in equipment and IV medications for kidney disorders. At the same time, we need to contain costs and maximize the amount of treatment we can give to the most people.

CMS claims it's going to study virtually every aspect of how care is affected by this new bundle. In theory, that sounds nice. In practice, they're going to need a lot of guidance to look in the right places, and not just at the "usual suspects." As far as seeing nephs, for example, my reaction was that a lot more time is going to be taken up checking off tick marks for what other illnesses folks had in the past or have now, to get more $$, and a lot less time spent on...whatever it was spent on before at those visits. How do you measure whether you are still seeing an MD, but now your needs are not met? Satisfaction, I suppose, but there's no good tool to measure that, nor does it predict ANY other outcome measure.

Congress, I think, did not give a lot of thought about what "bundling" services under Medicare Part B was going to mean as far as higher co-pays. When the "composite rate" was about $150/treatment, the 20% co-pay was about $30 treatment x 12 standard HD treatments per month = $360.

With the base rate for dialysis at about $250--with MANY people's treatments costing more than that, say, $300, the co-pay doubles to $720/mo. During the first 120 days there's a 51% add-on. Good for clinics: now they're making, say, $400 per treatment. Not so good for dialyzors, who'll be responsible for $80/treatment--or $1,000 co-pay per month for those first 4 months.

It will almost certainly be cheaper to get SOME kind of backup healthcare plan than to pay those co-pays out of pocket. Non-payment IS a reason that clinics can drop folks. Some options: Medigap in states that allow it, an employer group health plan, a state plan (check http://www.healthcare.gov.)

Your copays are about the same if you are an "average" patient - since you would have been paying the 20% on the separately billable items too. If you use more than average EPO, Iron, etc then your copays could be less.

The copays for labs are new, to the extent that they're in the new bundle but they aren't that much.

The big one is the first 120 day adjuster but if it is used no other patient level adjustments apply. CMS addresses concerns about copays in their final rule - when it comes to the Part D drugs, having them covered under Part B will represent a savings for a lot of people.

You weren't previously paying co-pays on lab tests, which are now included in the bundle, and having drugs in the bundle also eliminates Part D help, which a lot of dialyzors were eligible for. I still think folks are going to come out behind.